I'm Forbes' NY tech staff writer covering tech and advertising on the real best coast. Send tips and thoughts to akonrad@forbes.com. I previously served as Forbes' homepage editor for six months and reported before that at Fortune Magazine. I've written interviews for "The Leonard Lopate Show" on WNYC public radio and also served as a regional manager for a test prep company along the way. My love of startups and all things tech began at Harvard, where I incongruously studied medieval history and archaeology. Follow me on Twitter: @alexrkonrad

The Market's Hammering Ad Tech Again, So Big Private Shops Go Back To The Well

Wall Street and ad tech are awkward bedfellows. Some companies have gone out on the market in recent months to success, but for each of those there’s a dud. And when investors get anxious, even the healthiest are dragged down. So among a whole tier of later stage, large private ad tech firms, there’s a simple response: raise money as if you were going public, without the market hassle.

That’s what MediaMath has done Tuesday, announcing a combined fresh funding of a whopping $175 million, $73.5 million of that in a Series C round led by growth equity firm Spring Lake Equity Partners, the rest a large debt facility led by Silicon Valley Bank.

“We view this as a financing event like a public offering is,” says MediaMath CEO Joe Zawadzki. “The point of having patient and disciplined focus instead of thinking IPO or bust was an important consideration.”

MediaMath hadn’t raised much funding in the past, raising just $12.5 million in a Series B round over three years ago. Raising a lot of money to put up huge growth numbers is common in ad tech, and some have gone public without profits but on the promise of it in the future. MediaMath hadn’t gone that route to date. The company boosted sales from $135 million in 2012 to $311 million last year, and was profitable before interest, taxes, depreciation and amortization, with earnings of $14 million in 2013 compared to $0.6 million the year before, with growth still over 100% for 2014 so far.

That “a-traditional” approach has allowed Zawadzki’s shop to make several acquisitions as ad tech peers burn out, the chief executive says, and raising such a large amount will allow MediaMath to keep looking to buy.

And like other successful larger players in the space, MediaMath is looking to rapidly expand outside the United States. A similar goal has reportedly led another leading ad tech firm, AppNexus, to talk to Chinese giant Alibaba about a possible investment that could value that company at as much as $1 billion.

Crossing a billion could prove tough for AppNexus, however, and it’s a threshold that few in ad tech have reached either public or private. Another shop known first for its demand-side platform, Turn, raised an $80 million late-stage round in January at a $650 million valuation; AdRoll raised $70 million in April. MediaMath didn’t disclose its valuation on this round but appears to have gotten to that neighborhood around $550 million or $600 million before factoring in the new funds.

“Valuation is the last thing on my list,” says Zawadzki. “Did we get a crazy multiple like consumer companies right now, a great price? I wish, but no.”

Fundraising will remain attractive to ad tech companies like MediaMath, AppNexus and Turn as the public market capitalizations of their public peers continue to get hammered. Just two months ago, The Rubicon Project rang the opening bell at the New York Stock Exchange, the ad tech company’s stock jumping 33% in its opening day. The ad tech firm’s stock price has since dropped nearly 40% and now sits 15% below its initial list price, the company’s market cap sitting under $500 million.

But that’s not to suggest that Rubicon Project did anything wrong or somehow misled investors. Everyone’s down, including Criteo, largely touted as one of the pure successful IPOs of the last few months in the space. Its stock is down 18% since going public in October.

“It’s a pendulum moment we are seeing right now,” says one ad tech executive. “A few months ago, people were in love. Now they’re writing them off. But I think this settles down.”

One issue for the ad tech community is that many investors continue to compare and group ad tech firms that have either differentiated their business models or are straining to show a unique offering. Some, like MediaMath, started as platforms to help marketers buy ad inventory automatically online, but are now offering more end-to-end marketing software suites. Others like Rubicon Project have sought to stand out as an exchange or marketplace alternative to the Google juggernaut.

Zawadzki argues that smarter investors don’t fall for the rising or falling tide that could impact valuations and stock prices across the sector, but the bleed over damage is happening overall. Industry sources note that the companies public today remain a mix–some like Criteo and Rocket Fuel more trusted, others like Millennial Media in free-fall (down 83% since its 2012 IPO).

“The companies that have gone public aren’t necessarily the best ad tech companies,” says the industry exec. The top tier of private companies right now are watching, and are taking a wait and see approach, he says. “If you raise as much money as MediaMath did without spending a ton, that’s probably someone who has a good business going.”

Still, the strong, if temporary window for IPOs had the industry scrambling to consider going public–and in a more bullish market, Zawadzki might have considered a healthy price tag to head to the stock exchange. So as long as that window now appears closed, expect more ad tech firms to announce funding as they continue to watch and grow.

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